Tax Credits

dktreesea

antrobus wrote: »

That would basically be my position. I would guess that you have the same practical experience as I do.

Although I would add, that it does happen that a zombie business established to exploit tax credits sometimes springs to life and actually works.:)

If it works spectacularly well and the people running the business don't then need any support from other taxpayers, then fair enough, Blair's vision of even if only a few businesses live to tell the tale, supporting budding entrepreneurs via the benefits system will have been well worth it, is realised.


But on the accounting side of things, I see a somewhat different reality with some of my clients. On the one hand they want to grow their businesses but on the other hand they don't want to lose the considerable support they have been receiving.


If the support were time limited, then someone pulling in £1k to £10k a year of profits, with three or four children to support, would need to grow their business, looking to the future when little or no support would be available. I notice the same thing about Americans out of work, how they are in a panic and desperate to get another job because they know at some point their unemployment insurance will run out.


Here though - and I'll believe the implementation of the minimum income floor when I see it, such is the intense lobbying against it - the support just goes on without end. As long as a business is being run with the expectation of a profit, it doesn't seem to matter if that profit is forever small, or indeed a loss.


Do you think that's fair, that a section of the community, however small in the greater scheme of things (30 million people in work, the vast majority of whom get no help from welfare, be they employed or self employed), should receive such generous help, year in, year out, with barely any strings attached?

kinger101

dktreesea wrote: »

If it works spectacularly well and the people running the business don't then need any support from other taxpayers, then fair enough, Blair's vision of even if only a few businesses live to tell the tale, supporting budding entrepreneurs via the benefits system will have been well worth it, is realised.


But on the accounting side of things, I see a somewhat different reality with some of my clients. On the one hand they want to grow their businesses but on the other hand they don't want to lose the considerable support they have been receiving.


If the support were time limited, then someone pulling in £1k to £10k a year of profits, with three or four children to support, would need to grow their business, looking to the future when little or no support would be available. I notice the same thing about Americans out of work, how they are in a panic and desperate to get another job because they know at some point their unemployment insurance will run out.


Here though - and I'll believe the implementation of the minimum income floor when I see it, such is the intense lobbying against it - the support just goes on without end. As long as a business is being run with the expectation of a profit, it doesn't seem to matter if that profit is forever small, or indeed a loss.


Do you think that's fair, that a section of the community, however small in the greater scheme of things (30 million people in work, the vast majority of whom get no help from welfare, be they employed or self employed), should receive such generous help, year in, year out, with barely any strings attached?

More widely, one concern with providing a tax credit subsidy to a non-viable business is where these might compete with non-subsidized businesses. I'm not sure to what extent this occurs in practice, but it's not fair on the non-subsidized business if they are having to undercut prices to compete with someone on state subsidies.

For example, someone could decide to become a gardener and take some business away from a small but profitable landscaping business.

gadgetmind

Yes, it's very likely that these tax payer subsidised "jobs" are making it hard for people/companies to compete. We really do need to revise our benefits system, and fast.

dktreesea

borkid wrote: »

I know a few self employed musicians who are doing very well but don't employ anyone. Who would they employ? They might buy in services to promote them or say an accountant but they wouldn't actually employ anyone. I am sure others can think of other professions where the self employed are doing well but don't employ anyone.
What's your definition of doing well?

But if a musician goes on tour, say, or records an album in a studio, they would probably buy in a lot of services. That's providing work for quite a lot of people, even if the musician is not the direct employer.


There are other kinds of businesses, e.g. nail bars, hairdressers, wedding make up, house cleaning, dog walking, which all lend themselves to being able to provide work for other people, even if just on a zero hours contract basis. But it can be a hassle employing people. They might not do the job as well as the owner.


In a benefit free world for the self employed, there would be every incentive to build the business and profits by bringing in extra people. So a market stall holder might work three markets on a Saturday instead of one, employing people to staff the other two while he staffs the main one. But is there any incentive for him to do so? Not if just running one stall only gives him a marginal income, but it doesn't matter because each year he gets a £20k top up, tax free from other taxpayers.

dktreesea

kinger101 wrote: »

More widely, one concern with providing a tax credit subsidy to a non-viable business is where these might compete with non-subsidized businesses. I'm not sure to what extent this occurs in practice, but it's not fair on the non-subsidized business if they are having to undercut prices to compete with someone on state subsidies.

For example, someone could decide to become a gardener and take some business away from a small but profitable landscaping business.

Quite. I couldn't agree more.


That's what happened to our garage across the road. Ten years ago, he employed six people, he was telling us one day, four of them full time. Now it's just him and another guy. He says the Polish mechanics are undercutting him, and they can afford to do so because they have enough children and rent, so it's worthwhile to claim benefits to make up any shortfall.

dktreesea

antrobus wrote: »

Eh?

First of all you say that are "4.1 million people who apparently aren't doing well enough to be able to afford to employ anyone else", now you 're saying that they "all making enough not to require any subsidy". Make up your mind.:):):)

But how exactly do those nations tax and benefit systems differ from that of the UK.

Look, no sensible person doubts that there are people who have and are taking advantage of the tax credits system, but none of that changes the fact that huge numbers of people are actually gainfully employed by small businesses.

In any event, the issue is being adressed by Universal Credits.

If it's addressed by UC, then that at least would be a somewhat satisfactory outcome. The lobbying against the minimum income floor is intense. It will be interesting to here form any new claimants under UC to see if it has actually been applied to them.


To the 4.1 million of the self employed who don't employ anyone, I would think, just from the benefits statistics that are published that, in line with the employed, most aren't entitled to benefits. As far as I'm concerned they can all decamp to a place like Findhorn and learn how to make jam and spin wool, maybe never make a dime again, as long as they don't rely on other taxpayers to supplement their life style.


I'm just talking about the ones who do receive very generous subsidies, and questioning how long it will be until they have built up their businesses to even make the FT NMW in profits, much less grow the business enough to warrant employing someone/ or even just using other people's services, which is a kind of employment, akin to using a contractor.


Tax systems in other countries? I've lived in a few English speaking countries. In the States, once employment insurance runs out, if you don't work you don't pay for your accommodation. Plenty of homeless people. You do still get to eat though, via the food stamps. Personal income tax is lower than here, but there are plenty of state taxes, like sales tax to more than make up the difference.


Australia has a few taxes we don't have, for example credits and debits taxes for transactions done through the banking system. That's a huge money spinner. But they don't support the self employed unless they are on NEISS (support for the first year - heavily monitored) or are struggling farmers, and for those on the equivalent of JSA, after three months you take whatever job they give you . The employer pays you a wage and the government pays the employer over a two year period. Walk away and there's a six month stand down. No such thing as 100% of your rent being paid unless you're a social tenant. Even then, if you are earning, you pay market rates.


New Zealand has GST (VAT) on everything, including food. No support for the self employed. Nowadays they have flexi wage, which seems to be help for people in receipt of other government assistance to go self employed. But if you just decide to give up work one day to start your own business, you're on your own.


In all these countries, you pay something towards your medical costs. Australia even has a medicare levy. I hope for one here. 1.5% tax on income, form the first £1 of income should do it. There's health insurance, which is a kind of tax on the people, which we don't have to pay in the UK, i.e. the NHS is pretty much are equivalent to private health care in all three countries.


I've come to the conclusion that the UK is one of the least taxed and highest welfare countries on the planet. No wonder our public debt is forever on the rise.

Thrugelmir

dktreesea wrote: »

I've come to the conclusion that the UK is one of the least taxed and highest welfare countries on the planet. No wonder our public debt is forever on the rise.

Hence the reason we need to address the welfare state. Subsidising work simply makes the rich richer and more dominant.